The deal, worth a maximum of $94 million, will pay Rose $10 million to $11 million more than he would have been able to earn under the league's old collective bargaining agreement.
The new CBA's so-called Derrick Rose rule is meant to reward players who vastly outperform their rookie contracts.
The Chicago native said it was "a dream come true" to play for the Bulls, and added, "With this new contract the dream continues."
Rose, the youngest MVP in league history, averaged 25 points and 7.7 assists per game last season and helped lead the Bulls to the Eastern Conference Finals against Miami.
"Derrick is the centerpiece of what we're putting together here," General Manager Gar Forman said Tuesday. "We want Derrick to be a Bull for a long, long time. It's very important that we put the right pieces around Derrick."